What's going on?
Just when you thought you were out, the pandemic pulls you back in: news of a fresh coronavirus strain prompted a market selloff on Friday.
What does this mean?
You can never quite relax in these pandemic-stricken times: surging Covid cases are a constant threat to the world’s already-slowing recovery, and the arrival of a brand new variant has sparked worries that economies might take another hit soon. The variant’s suspected to have caused a surge of South African cases last week, and global health officials reckon it could both spread faster than Delta and better evade our vaccines. That means it has the potential to send countries back into the depths of lockdowns, which would cripple economies around the world. At least governments are acting fast: plenty of countries have already reimposed travel restrictions to try to limit the spread.
Why should I care?
For markets: Stocks get grounded.
Stock market indexes around the world plummeted on Friday, as concerned investors started selling off stocks and buying so-called “safe haven” assets – like gold and government bonds – instead. The prospect of travel restrictions hit airline stocks particularly hard: British Airways’ parent IAG initially saw its stock fall by 21%. There is at least one company that could benefit if restrictions come back into force, mind you, which might be why Zoom’s stock rose 9%.
Zooming out: Don’t believe the hype.
Take those investor reactions with a pinch of salt: professional investors are taking a break for the holidays, which means there’s been a lot less trading activity than usual. The trades that are being made, then, could be having a much bigger impact on the wider markets than they would do normally. Plus, it was a Friday: investors and traders might just be keen to get rid of their risky assets before the weekend, in case more bad news comes out when markets are shut and they can’t do anything about it.